2017 (1) TMI 1433 - AT - Income Tax

Penalty levied U/s 271D - AO made addition invoking the provisions of Section 68 treating the amount as bogus cash credits and on the other hand invoked the provisions of Section 269SS treating the amount as cash loans received - AO himself was not in belief whether the amount was a bogus cash credit or it was a loan received in cash in violation of Section 269SS - CIT-A deleted partial levy - Held that - Assessee in his written submissions has stated that assessee s husband was an Army Officer, who was declared martyr during the Kargil war and the Government of India awarded him Gallantry Award posthumously and allotted a petrol pump for her livelihood and her children in the year 2001. But she faced lots of problems in running of petrol pump due to paucity of funds. Therefore, her relatives helped her. In Section 269SS it is held that no person shall take or accept from any other person any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearings system through a bank account, but in the present case, the persons, who helped her, are her relatives or neighbours, who were also agriculturists having no bank accounts at the time of funds given. The assessee has filed an affidavit by stating that she has received the amounts as gifts and advances. The assessee is a widow of an Army Officer and she was not educated. The allotment of the petrol pump was given by the Government of India but she was not perfect in conducting the business due to illiteracy. All these facts make a reasonable cause where the assessee should not be visited by the penalty U/s 271D of the Act towards the loans and deposits accepted from the known persons and close relatives in the hours of distress. Further it is also clear from the dwell stand taken by the Assessing Officer and further relief granted in the quantum appeal by the higher authorities that the assessee has not adopted this procedure to avoid or evade the tax. Therefore, considering the various case laws on this issue, no penalty should be imposed on the assessee for contravention of Section 271D of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Reduction of penalty under Section 271D from ?19,00,000 to ?9,00,000.
2. Imposition of penalty under Section 271D of ?9,00,000 on the assessee.

Issue 1: Reduction of penalty under Section 271D from ?19,00,000 to ?9,00,000
The appellate tribunal heard cross-appeals by the revenue and the assessee against the order dated 16/10/2012 for the A.Y. 2008-09. The revenue appealed the reduction of penalty under Section 271D from ?19,00,000 to ?9,00,000. The tribunal noted that the tax demand in question was only ?10.00 lacs and referred to a CBDT circular instructing that appeals should not be filed before ITAT where the demand/tax effect does not exceed ?10 lacs. Since the appeal did not fall under any exceptions mentioned in the circular, the tribunal dismissed the revenue's appeal as not maintainable.

Issue 2: Imposition of penalty under Section 271D of ?9,00,000 on the assessee
Regarding the assessee's appeal, the only issue was the penalty levied under Section 271D of ?9,00,000. The penalty was imposed for advances received from certain individuals, violating Section 269SS of the Act. The tribunal noted conflicting views by the Assessing Officer regarding the nature of the amounts, whether bogus cash credits or cash loans received. The assessee argued that the amounts were gifts and advances received from relatives and neighbors due to financial distress. The tribunal considered the circumstances, including the widowhood of the assessee and her husband's martyrdom, and held that no penalty should be imposed under Section 271D. Various case laws were cited to support this decision. Consequently, the tribunal dismissed the revenue's appeal and allowed the assessee's appeal, deleting the penalty imposed under Section 271D.

In conclusion, the tribunal dismissed the revenue's appeal and allowed the assessee's appeal, emphasizing the unique circumstances and the absence of intent to evade tax in the case.